Auditor Tests of the Physical Controls Over Raw Materials, Work

question 135

Multiple Choice

Auditor tests of the physical controls over raw materials, work in process, and finished goods are generally limited to

• A) observation and confirmation.
• B) observation and inquiry.
• C) inquiry and reconciliation.
• D) observation and reconciliation.

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Definitions:

Average Cost Formula

A method used to calculate the cost of goods sold and ending inventory by taking the total cost of goods available for sale and dividing it by the total number of units available for sale.

Cost of Goods Sold

The cost of goods sold (COGS) refers to the direct costs attributable to the production of the goods sold by a company, including material and labor costs.

Specific Identification

An inventory valuation method where each item in inventory is matched with a specific cost.

Inventory Costing

Inventory costing is the method used to assign costs to inventory items, determining the cost of goods sold and remaining inventory value.